A 17-year-old in Shanghai filed some 12,000 bogus return requests after discovering a flaw in one cosmetics shopping platform’s returns process. Then he turned it into over half a million dollars.
The teen, surnamed Lu, cushioned his piggy bank after receiving products worth 4.76 million yuan ($680,000), thanks to his 11,900 phony return requests addressed to the unnamed brand. Upon receiving said goods, he resold them on secondhand sites—thus securing four million yuan (an equivalent of around $570,000) in pure profit.
How’d he do it? With fake courier numbers, according to court records and reporting from the South China Morning Post.
The Hong Kong-based news outlet reported that the scheme worked so effectively because the brand’s process was automated. Given that it prompted shoppers to share tracking details to process the return (see: refund) even if the packages weren’t received and the goods were never recovered—let alone real—it was a win-win for Lu. At first.
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According to the South China Morning Post, Lu was sentenced to six years in prison over the summer. He was charged with exploiting a loophole in an online shopping platform’s refund policy to make thousands of fraudulent claims.
“The uncomfortable truth is that some customer returns are outright fraud —not a customer changing their mind, but deliberate abuse involving empty boxes, stolen goods and organized refund schemes,” said Disney Petit, LiquiDonate’s founder and chief executive officer.
It’s not uncommon, either; the retail technology company said that retailers estimate 15 percent of all returns are fraudulent, and that over 85 percent of those surveyed have experienced some form of return fraud.
LiquiDonate’s 2026 Returns Fraud Report estimates that 15 percent of all returns are, in fact, fraudulent. It’s a plausible percentage, given that one out of three consumers allegedly admits to committing at least one form of return-related racket, per the retail-tech firm’s findings.
“We used to allow instant returns to store credit and came across one customer with tens of thousands of dollars of purchases, which she was then reselling online,” reads one retailer’s testimonial, per LiquiDonate; another unboxed a giant rock instead of a weighted blanket.
Retailers lost $13.70 for every $100 in returned items to fraud, according to a 2023 report by the National Retail Federation (NRF) and Appriss Retail, with fraud and abuse increasing by 20 percent—accounting for 14.5 percent of sales and amounting to $101 billion—from the year prior. Fast forward to 2025, when the NRF projected returns would reach around $850 billion.
In the evolving retail landscape of 2026, LiquiDonate said return fraud is no longer a marginal issue but a systemic challenge impacting every part of the retail value chain, per the report.
Jump-scare findings include 82 percent of shoppers say free returns are an important consideration when shopping online; 81 percent read a retailer’s return policy before making a purchase; 71 percent say a poor returns experience makes them less likely to shop with that retailer again; and 57 percent will stop shopping with a retailer entirely after being charged for a return.
“What makes it worse is that retailers must process those fraudulent returns through the same systems as legitimate ones because of the messy reverse logistics process that we’ve all come to live with,” Petit said. “Fraud, policy abuse and honest returns all mix together, driving up costs for retailers.”
While Bay Area-based platform’s special report highlighted the rising challenges of returns fraud, it equally underscored the opportunity at hand—one that allows retailers to “rethink returns not just as a cost, but as a strategic advantage.” Because if said retailers can adapt “smarter, more sustainable” returns practices, then such “businesses can protect their bottom line while creating a better experience for customers and a positive impact on the environment.”
LiquiDonate’s report covered seven schemes, examining how the most common forms of fraud happen and what retailers can do to reposition returns.
“Returns fraud is a significant challenge for retailers, particularly in e-commerce,” Petit said. “Our hope with this report is to help retailers understand that they have options when it comes to return fraud. Technology can help.”
To start, consider that every returned item incurs a cost of $25-$30.
“A 2021 Return Logic report estimates that shipping and label costs alone amount to $7 to $9 per return,” the report reads. “Amazon alone accepts 1.2-1.5 billion returns per year. Assuming it represents approximately 8 percent of the total retail market, industry-wide return volumes likely exceed 15 billion packages annually—suggesting more than $100 billion in shipping and labeling costs a year.”
Taking reverse logistics and operational strain into consideration, the report found that 40 percent of retailers must choose between shipping new orders and processing inbound returns due to limited resources. And if it takes an average of 6-10 days for a returned item to be processed and put back on the shelf, seasonal sales suffer, and microtrend margins are totally eroded by the delay.
It’s one of the reasons retailers charge for returns. While previously deemed gauche, nearly three-quarters (72 percent) of merchants now charge for at least one return option—each with its own nuance.
Take, for example, bracketing. This is when a customer purchases multiple versions of an item (three sizes, a couple colors) with the full intention of returning all but the size or shade that fits. LiquiDonate doesn’t consider bracketing as fraud or policy abuse; it’s an example of a costly behavior.
It’s also a separate scheme from wardrobing—what the report called “temporary-use fraud.” This, per LiquiDonate, is straight-up returns abuse because the behavior seeks to exploit a retailer’s return policy. It involves buying an item, using it once for an event or occasion—perhaps a bridesmaid dress or a Halloween costume—and then returning it in used condition for a full refund. LiquiDonate said some 13 to 70 percent of shoppers admit to wardrobing, per varying industry data. Sixty percent of retail executives identified it as a top form of fraud.
“Free and frictionless returns trained consumers to expect zero consequences, but the bill is now coming due,” Petit said.
Last March, LiquiDonate was named to the New York Fashion Tech Lab (NYFTL) 2025 cohort. The nonprofit described the retail-tech firm as working to “reduce logistics inefficiencies and gain reporting insights while giving back.”
Cofounded by venture catalyst Springboard Enterprises, the 12-week program is for early-stage women-led innovators; its 80-plus alumna network includes startups like Jumper AI and Trendalytics. The cohort is also backed by industry heavyweights; last year’s fashion allies included Lululemon and Saks Global while program partners included HSBC and SAP.
And a year earlier, LiquiDonate was named as one of 2024’s most “cutting-edge startups reinventing direct-to-consumer business” by research and media firm The Lead on its third annual “Leading 100 List.”
